Net sales of $161.3 million, decreased $72.5 million, or 31.0%, the result of continuing increased competition and the challenging pricing environment; despite an overall increase in volumes.

Gross profit of $116.5 million, decreased $66.2 million and as a percentage of net sales, was 72.2% compared to 78.2%.

Research and development (R&D) expenses of $14.7 million decreased $3.3 million; as our R&D spending is not evenly distributed across quarters. R&D as a percentage of net sales increased to 9.1% from 7.7% in the previous year quarter.

Selling, marketing, general and administrative expenses of $24.2 million increased $2.0 million.

Operating income of $77.6 million decreased $65.0 million and as a percentage of net sales was 48.1% as compared to 61.0%.

Foreign exchange expense of $19.6 million increased $13.7 million from $5.9 million, principally due to the weakening of the U.S. dollar vs. Canadian dollar at a higher degree than the prior year quarter.

Tax expense of $10.0 million decreased $20.4 million with the effective tax rate improving to 15.5% from 21.7%.

Net income attributable to Taro was $54.5 million compared to $109.9 million, a $55.4 million decrease, resulting in diluted earnings per share of $1.35 compared to $2.59.

Cash Flow and Balance Sheet Highlights

Cash flow provided by operations was $72.7 million compared to $56.0 million for the three months ended June 30, 2016.

Mr. Abhay Gandhi, Taro’s interim CEO stated, “Our results reflect the difficult generic pricing environment, particularly in the U.S., driven by more intense competition among manufacturers, new entrants to the market, buying consortium pressures, and a higher ANDA approval rate from the FDA. We expect this product-specific pricing pressure to continue into the future.” Mr. Gandhi continued, “We believe our long-term strategy is well balanced, with a leadership position in many of our key molecules, our pipeline, our commitment to providing quality products, and strong manufacturing and customer service capabilities.”

FDA Approvals and Filings

The Company recently received approvals from the U.S. Food and Drug Administration (“FDA”) for four Abbreviated New Drug Applications (“ANDAs”): Children’s Ibuprofen Oral Suspension USP (OTC) 100mg/5mL, Ibuprofen Oral Suspension 100mg/5mL, Betamethasone Valerate Topical Foam 0.12%, and Felbamate Oral Suspension USP 600mg/5mL. The Company currently has a total of thirty-three ANDAs awaiting FDA approval, including six tentative approvals.

Share Repurchase Program - Returning Capital to Shareholders

On November 23, 2016, the Company announced that its Board of Directors approved a new $250 million share repurchase of ordinary shares. Under this authorization, repurchases may be made from time to time at the Company’s discretion, based on ongoing assessments of the capital needs of the business, the market price of its stock, and general market conditions. No time period has been set for the repurchase program, and any such program may be suspended or discontinued at any time. The repurchase authorization enables the Company to purchase its ordinary shares from time to time through open market purchases, negotiated transactions or other means, including 10b5-1 trading plans in accordance with applicable securities laws or other restrictions. During the quarter, the Company repurchased 80,007 shares at an average price of $106.07. Under this program, in total, the Company has repurchased 598,972 shares, with $187.2 million remaining under the authorization.

Form 20-F Filings with the SEC

On June 21,2017, the Company filed its Annual Report on Form 20-F with the U.S. Securities and Exchange Commission (“SEC”) for the fiscal year ended March 31, 2017.

The Company cautions that the foregoing financial information is presented on an unaudited basis and is subject to change.

************************

About Taro

Taro Pharmaceutical Industries Ltd. is a multinational, science-based pharmaceutical company, dedicated to meeting the needs of its customers through the discovery, development, manufacturing and marketing of the highest quality healthcare products. For further information on Taro Pharmaceutical Industries Ltd., please visit the Company’s website at www.taro.com.

SAFE HARBOR STATEMENT

The unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments necessary to present fairly the financial condition and results of operations of the Company.The unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 20-F, as filed with the SEC.

Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.These statements include, but are not limited to, statements that do not describe historical facts or that refer or relate to events or circumstances the Company “estimates,” “believes,” or “expects” to happen or similar language, and statements with respect to the Company’s financial performance, availability of financial information, and estimates of financial results and information for fiscal year 2018.Although the Company believes the expectations reflected in such forward-looking statements to be based on reasonable assumptions, it can give no assurances that its expectations will be attained.Factors that could cause actual results to differ include general domestic and international economic conditions, industry and market conditions, changes in the Company's financial position, litigation brought by any party in any court in Israel, the United States, or any country in which Taro operates, regulatory and legislative actions in the countries in which Taro operates, and other risks detailed from time to time in the Company’s SEC reports, including its Annual Reports on Form 20-F.Forward-looking statements are applicable only as of the date on which they are made.The Company undertakes no obligations to update, change or revise any forward-looking statement, whether as a result of new information, additional or subsequent developments or otherwise.

**Financial Tables Follow**

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(U.S. dollars in thousands, except share data)

Three Months Ended June 30,

2017

2016

Sales, net

$

161,321

$

233,784

Cost of sales

44,778

50,885

Impairment

—

108

Gross profit

116,543

182,791

Operating Expenses:

Research and development

14,658

17,920

Selling, marketing, general and administrative

24,249

22,252

Operating income

77,636

142,619

Financial (income) expense, net:

Interest and other financial income

(4,476

)

(3,306

)

Foreign exchange expense

19,642

5,909

Other gain, net

2,119

403

Income before income taxes

64,589

140,419

Tax expense

9,987

30,425

Income from continuing operations

54,602

109,994

Net loss from discontinued operations attributable to Taro

(47

)

(101

)

Net income

54,555

109,893

Net income (loss) attributable to non-controlling interest

58

(4

)

Net income attributable to Taro

$

54,497

$

109,897

Net income per ordinary share from continuing operations attributable to Taro:

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